IN THE NEWS #461 - The Economy

Americans are hoping the economy will continue to be strong in the New Year. Yet the evidence is the American economy has been slowing this past year after three years of growth.

The United States Commerce Department reports the financial health of the nation every month. The report includes an index of leading economic indicators. The index lists ten economic activities. Economists use this list to measure what the economy might be like about three to six months in the future.

The index fell two-tenths of a percent in November. It decreased about four-tenths of a percent during the last twelve months. This decrease came after three years of continual gains in the index of leading economic indicators.

One reason for the decrease is a drop in the price of shares on the stock market. Stock market performance is one of the leading economic indicators. The Dow Jones Industrial Average is a measure of the value of stocks in major American companies. Trading on the Dow Jones currently is about seven-hundred points lower than it was at the beginning of the year.

The stock prices of a number of large companies have decreased recently. Many experts blame decreases on company announcements that future earnings would be less than expected. Major companies including Federal Express and Coca-Cola have made such announcements.

Technology companies are going through a difficult period. Many of their stock prices reached record highs last year. But some of the same stocks now are falling to record-low levels. A number of businesses related to the World Wide Web are failing.

Falling stock prices and reduced profits have led a number of companies to cut jobs. Job loss is another leading economic indicator. Experts also blame the stock market for lower-than-expected holiday sales. Earlier this week, a trade organization reported sales in shopping-center stores. It said sales increased by a little more than two percent this holiday season. A year ago, holiday sales increased almost eight percent.

Higher fuel costs may also have kept people from buying more at holiday time. For example, a number of Americans reduced their spending because of a big increase in the cost of heating their homes.

Most economic experts agree that the American economy is slowing. But they do not believe there will be a recession next year. A recession officially means economic decreases for six straight months.

Many people look to the nation's central bank, the Federal Reserve, for help. In January, Federal Reserve officials may reduce interest rates on loans. Experts say this should mean that Americans would begin to borrow and spend more money.

This VOA Special English In the News was written by Jerilyn Watson. This is Steve Ember.